The US dollar regained ground against its peers when risk aversion came back in the financial markets. There have been no major reports out of the US but traders seem to be pricing in the possibility of a Fed rate hike for the FOMC meeting next week. US crude oil inventories and import prices data are up for release next.
The euro was weaker against the dollar and yen but it managed to advance against the higher-yielding commodity currencies. Data from the euro zone was weaker than expected, as the German ZEW economic sentiment index held steady at 0.5 instead of improving to the projected 2.8 figure while the region’s reading ticked up to 5.4, short of the 6.7 consensus. Only the euro zone industrial production report is scheduled today and a 0.8% decline is expected.
The pound slid against its forex rivals after the UK CPI reports disappointed. Headline inflation was unchanged at 0.6% instead of rising to the projected 0.7% figure while core inflation was also steady at 1.3%. PPI input prices posted a meager 0.2% uptick versus the projected 0.6% increase. UK jobs data is due today and a 1.7K increase in claimants is expected for August while the average earnings index likely slid from 2.4% to 2.1% for the three-month period ending in July.
The franc returned its recent gains to the dollar but was able to advance against the pound and the yen. Swiss PPI was weaker than expected with a 0.3% drop, sharper than the estimated 0.2% dip and the previous 0.1% decline. ZEW economic expectations data is up for release next.
Yen pairs had a volatile run after the Nikkei reported that BOJ policymakers are considering lowering interest rates further into negative territory while counteracting this move with a reduction in JGB purchases. Still, a BOJ official said that these are still up for discussion and that the debates would proceed cautiously. Japan’s revised industrial production report is scheduled for release today but no changes to the flat reading are eyed.
Commodity Currencies (AUD, NZD, CAD)
The comdolls sold off sharply against their peers when risk aversion returned to the markets. Data from China came in stronger than expected earlier in the day but the upbeat mood wasn’t sustained as Europe started printing downbeat reports and Fed rate hike expectations weighed on sentiment. New Zealand printed a larger than expected current account deficit and is set to print its Q2 GDP next, likely reporting a 1.1% growth figure.